The market seemed underwhelmed by last week's earnings announcement from Textron Inc. (NYSE:TXT) despite the healthy numbers. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

The Impact Of Unusual Items On Profit

To properly understand Textron's profit results, we need to consider the US$153m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Textron to produce a higher profit next year, all else being equal.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Textron's Profit Performance

Unusual items (expenses) detracted from Textron's earnings over the last year, but we might see an improvement next year. Because of this, we think Textron's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 57% annually, over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into Textron, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Textron you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Textron's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com